Almost Clear Skies?

Almost Clear Skies?

A s the US economy powers along, aided by the Tax Cuts and Jobs Act passed at the start of the year, the environment continues to be broadly favorable for most skill segments of the staffing industry. This article examines the findings of SIA’s most recent biannual US Staffing Industry Forecast report for insights on growth in the overall industry as well as a more granular look at trends in each skill segment.

Holistic Outlook

In its September forecast report, SIA projects US temporary staffing industry revenue to grow 3% this year to $127.6 billion and another 3% in 2019 for a market size of $131.3 billion. Growth drivers include expected robust GDP growth of roughly 3% this year as well as next, and a strong labor market — as evidenced by record-low jobless claims numbers and nonfarm payroll employment growth that has averaged 201,000 per month through September.

Nevertheless, the positive macroeconomic statistics are somewhat tempered by the fact that the US economy is in its 10th year of expansion, with the unemployment rate at 3.7% in September — the most recent available at press time — and the supply of available workers dwindling. With orders exceeding candidates for many staffing firms, the lack of workers is a growing headwind to growth. One silver lining is that wage growth has accelerated across many occupations, providing support to staffing firm revenue growth as bill rates rise.

While 3% represents the overall industry growth rate, the revenue growth outlook varies significantly by skill segment, as shown in the accompanying table. For this year, forecasted growth rates range from a 2% decline in office/clerical staffing to 7% growth in both marketing/creative and education staffing.

Commercial Staffing

Declines in total employment in office/ clerical occupations, in part due to automation, have weighed on demand for agency temporary workers in these roles. SIA estimates a 5% decline in the market occurred in 2017, although the rate of decline is forecast to moderate. Industrial staffing (that is, staffing of “blue collar” occupations) revenue is projected to grow 4% this year, mimicking business expansion involving manufacturing, warehousing, construction and energy jobs. Multiple data points suggest significant wage growth and bill-rate growth.

Professional Staffing

SIA forecasts the IT temporary staffing market to grow a robust 4% this year to reach $31.0 billion, and 3% next year. Client industry verticals with outsized demand include financial services, healthcare and technology.

The healthcare temporary staffing industry is forecast to decelerate to 3% year, in part due to a plateau in demand for travel nurse staffing after several years of rapid growth. The locum tenens segment is expected to see the strongest growth rates this year and next year among the four healthcare subsegments, supported by upward movement in pay rates.

Finance/accounting and engineering temporary staffing are both expected to see healthy growth of 4% this year and next year, in part due to rising wages and bill rates. The recovery of oil prices has been a boon to the energy sector and fuels demand for engineering staffing from agencies.

The marketing/creative staffing market is expected to grow 7% this year and next year, driven by the digital transformation of marketing departments and the need for talent with skills in websites, mobile apps and social media. Education staffing — the outsourcing of substitute teacher staffing by school districts — continues to grow as these services become more commonplace nationwide.

Implications

SIA’s industry outlook implies a favorable demand environment, especially for staffing firms with strong recruiting and delivery engines that have aligned operations with the current candidate-driven environment. In addition, staffing firms may find the segment growth forecast useful for benchmarking their operations, assessing whether they may be taking market share from competitors, and for budgeting. Clients of staffing firms can benchmark and compare their growth in spending on staffing agencies with growth across the industry. Clients can also take note of growth trends in pay as a key component of keeping and retaining their talent this year and next year.